Labour Market Outcomes
Wages Outcomes
Principal sources of gross household income ($ p/w.) 2015-2016
Weekly Employee Income (wages and salaries) $3,182
Weekly own business income (profits) $2,669
Weekly gov pensions and allowances $1,103
Weekly income from other sources $5,243
All income units $3,172
Average weekly earnings are
calculated using information the
ABS collects from approximately
5,000 employers to determine
estimates of average weekly
earnings.
The average Australian
household earns just under
$110,000 per annum, the top 1
in 5 earn more than twice this
(exceeding $260,000) and the
bottom 1 in 5 take home around
one-fifth of the average (a little
over $23,000). This means that
while the bottom fifth of households take home just 4% of all income, the top fifth get almost half
(48%).
Nominal Wages: the amount of money one earns per hour. Real Wages: nominal wages but
considering inflation. An increase in real wages occurs when wages rise more quickly than inflation.
On the other hand, if real wages rise more slowly than inflation, then your real wages - your
purchasing power - has declined.
Wage growth in Australia is low, seen across the States, Territories, industries and across both the
public and private sectors. Real wage growth has also been low over the past few years. However,
because CPI inflation has also been low, the weakness in real wage growth has not been as
pronounced as the weakness in nominal wage growth. Over the past five years, annual real wage
growth has averaged 0.4 per cent, compared with 1.0 per cent in the decade prior.
What is the relationship between real wage increases and productivity? Labourers work harder,
therefore increasing productivity in efforts to gain a wage rise. Hence, Increase in real wages
correspond to increase in productivity and vice versa. Under enterprise bargaining, employees often
, gain higher wages at the individual enterprise level in exchange for taking steps to increase
productivity.
Real labour costs are calculated using a ratio of total labour costs to real output.
General Trend for Real Labour Costs in Australia: Labour Costs in Australia increased to 103.80 Index
Points in the first quarter of 2019 from 103.60 Index Points in the fourth quarter of 2018. Labour Costs
in Australia averaged 76.20 Index Points from 1985 until 2019, reaching an all time high of 103.80
Index Points in the first quarter of 2019 and a record low of 44.10 Index Points in the third quarter of
1985.
Wage Differentials
Wage differential is described as the difference in wages between workers with different skills in the
same industry, or between workers with comparable skills in different industries or localities.
This is caused by:
● Compensating wage differentials (ie. for working in unsafe conditions, or unsocial hours)
● Reward for human capital (human capital: the skills, knowledge, and experience possessed
by an individual or population, viewed in terms of their value or cost to an organization or
country.)
● Different skill levels/qualifications
● Differences in productivity and revenue creation
● Trade Unions and their collective bargaining power
● Employer discrimination
Occupational mobility is the ease with which labour to switch between different occupations, to find
gainful employment or meet labour needs. Occupational mobility is affected by the level of
transferable skills and educational requirements of jobs. It can help maintain strong productivity and
employment levels. When it is easy for laborers to transfer occupations, the supply of labour will
increase for a given demand, hence lowering the wage rate until equilibrium is reached.
High occupational mobility = high labour supply, therefore less need for wage rise to attract
labour. However,
Occupational mobility restricted = labour supply less abundant, and wage rates tend to be
higher.
Wage rates for workers in industries is dependant on the relative bargaining power of the employees
and employers in that industry. Eg. in industries with skill shortages or high levels of union
membership, and these unions are capable of withholding their labour through industrial action, wage
levels tend to be higher, reflecting the strong bargaining position of workers (eg. mining industry).
The bargaining power of workers is affected by:
● Unique skills and qualifications
● The importance of labour to the firm
● Trade unions
○ Size of trade unions strike fund
○ Time of the strike
○ Effect of Picketing: A strike usually gives the employer bad publicity, and if a strike can
cause customers and suppliers to avoid the employer than the union will have a strong
Wages Outcomes
Principal sources of gross household income ($ p/w.) 2015-2016
Weekly Employee Income (wages and salaries) $3,182
Weekly own business income (profits) $2,669
Weekly gov pensions and allowances $1,103
Weekly income from other sources $5,243
All income units $3,172
Average weekly earnings are
calculated using information the
ABS collects from approximately
5,000 employers to determine
estimates of average weekly
earnings.
The average Australian
household earns just under
$110,000 per annum, the top 1
in 5 earn more than twice this
(exceeding $260,000) and the
bottom 1 in 5 take home around
one-fifth of the average (a little
over $23,000). This means that
while the bottom fifth of households take home just 4% of all income, the top fifth get almost half
(48%).
Nominal Wages: the amount of money one earns per hour. Real Wages: nominal wages but
considering inflation. An increase in real wages occurs when wages rise more quickly than inflation.
On the other hand, if real wages rise more slowly than inflation, then your real wages - your
purchasing power - has declined.
Wage growth in Australia is low, seen across the States, Territories, industries and across both the
public and private sectors. Real wage growth has also been low over the past few years. However,
because CPI inflation has also been low, the weakness in real wage growth has not been as
pronounced as the weakness in nominal wage growth. Over the past five years, annual real wage
growth has averaged 0.4 per cent, compared with 1.0 per cent in the decade prior.
What is the relationship between real wage increases and productivity? Labourers work harder,
therefore increasing productivity in efforts to gain a wage rise. Hence, Increase in real wages
correspond to increase in productivity and vice versa. Under enterprise bargaining, employees often
, gain higher wages at the individual enterprise level in exchange for taking steps to increase
productivity.
Real labour costs are calculated using a ratio of total labour costs to real output.
General Trend for Real Labour Costs in Australia: Labour Costs in Australia increased to 103.80 Index
Points in the first quarter of 2019 from 103.60 Index Points in the fourth quarter of 2018. Labour Costs
in Australia averaged 76.20 Index Points from 1985 until 2019, reaching an all time high of 103.80
Index Points in the first quarter of 2019 and a record low of 44.10 Index Points in the third quarter of
1985.
Wage Differentials
Wage differential is described as the difference in wages between workers with different skills in the
same industry, or between workers with comparable skills in different industries or localities.
This is caused by:
● Compensating wage differentials (ie. for working in unsafe conditions, or unsocial hours)
● Reward for human capital (human capital: the skills, knowledge, and experience possessed
by an individual or population, viewed in terms of their value or cost to an organization or
country.)
● Different skill levels/qualifications
● Differences in productivity and revenue creation
● Trade Unions and their collective bargaining power
● Employer discrimination
Occupational mobility is the ease with which labour to switch between different occupations, to find
gainful employment or meet labour needs. Occupational mobility is affected by the level of
transferable skills and educational requirements of jobs. It can help maintain strong productivity and
employment levels. When it is easy for laborers to transfer occupations, the supply of labour will
increase for a given demand, hence lowering the wage rate until equilibrium is reached.
High occupational mobility = high labour supply, therefore less need for wage rise to attract
labour. However,
Occupational mobility restricted = labour supply less abundant, and wage rates tend to be
higher.
Wage rates for workers in industries is dependant on the relative bargaining power of the employees
and employers in that industry. Eg. in industries with skill shortages or high levels of union
membership, and these unions are capable of withholding their labour through industrial action, wage
levels tend to be higher, reflecting the strong bargaining position of workers (eg. mining industry).
The bargaining power of workers is affected by:
● Unique skills and qualifications
● The importance of labour to the firm
● Trade unions
○ Size of trade unions strike fund
○ Time of the strike
○ Effect of Picketing: A strike usually gives the employer bad publicity, and if a strike can
cause customers and suppliers to avoid the employer than the union will have a strong
